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Traditionally in German election campaigns, energy policies are an important element of party manifestos, usually with a view to potential coalitions.
However, in 2017, as the parties’ recently published programmes show, energy is not as important as it was. It seems to be common understanding that major energy policy decisions have been taken, with the ‘Energiewende’ (the transition towards a largely renewables-based energy system) being implemented. Now is the time, though, to set the course for a ‘Energiewende’ 2.0, and any future government needs to clarify the development steps from an electricity generation-driven system to a transformed energy system, combining energy policies with environmental and mobility policies.
Our energy brief examines the German parties’ election manifestos, energy policy goals, technologies likely to receive legislative support, and core themes for potential coalitions.
The ever more complex intricacies of energy regulation
Politicians dealing with the many complexities of energy policies bemoan a diminishing interest on the part of fellow politicians, often pointing to the complexity of the subject. Germany’s Renewable Energy Act testifies to this challenge: its first version (2000) comprised 13 paragraphs, whereas the amended 2017 version has 171 paragraphs.
Lobbyists and other stakeholders are already busy making suggestions for the legislation’s next amendment. It remains unclear, though, if the Act will undergo further reforms. While Germany’s Social Democrats and the Green Party wish to keep its current form, viewing tenders as the ‘means of choice’ to determine subsidies, the Conservatives, Chancellor Merkel’s CDU, calls for a gradual exit, but without offering a concrete plan for financing.
Germany’s LibDems, the FDP, claims that the Act’s initial target, to secure market entry for renewable energies, has been reached. They now want to abolish its ‘continuing subsidies’.
The Renewable Energy Act in its current shape, though, is much more than a subsidy system. Beyond this issue, it provides a regulatory framework for renewable development goals and individual technologies. Simply abolishing the Act would not help to solve the existing cost problem, since most renewable assets operate under a continuation permit and would be eligible to receive fixed remuneration, preventing a swift cost decrease for end-consumers.
Also, we would need a new and comprehensive legal framework to define technical and system-stabilising prerequisites. These, so far, have been provided by the Renewables Energy Act. Should, for example, a newly elected government coalition between Conservatives (CDU) and LibDems (FDP) take office in October 2017, a repeal of the Renewable Energy Act would be far from definite. The quest for the legislation’s alternative financing, though, seems to be a common denominator among Germany’s major political parties.
Instead, a new government might offer a plan changing the system currently stipulating cost allocations and fees to include all available energy sources. The German Ministry of Economics is working on this option, having already started a controversial debate in the capital. It seems fair to assume that the Ministry’s role and influence is likely to increase further. And if a new minister takes office in October 2017, we may see less tendency to centralise. Also, policies might increase the consideration of new technologies that will secure and build Germany’s position as a leading exporter of energy technologies.
Paris Climate Agreement and minimum price for CO2
All signatories of the G20 Paris Climate Agreement are committed to curbing greenhouse gas emissions, meaning that decarbonisation is about to become an objective of federal environmental and energy policies. There is no consensus, though, on how to reach this goal. Major EU players seem to view the introduction of a CO2 minimum price as the most effective strategy, France being among the drivers. French Environment Secretary Hulot has called for a price of EUR 30 / tonne from 2020, and EUR 100 / tonne from 2030.
In Germany the political parties more or less agree that electric energy storage and a CO2 minimum price will be major means to achieve decarbonisation – apart from the Liberal Democrats who reject meddling with prices as a matter of principle.
Adopting this strategy could enable the German Chancellor to dispose of another sensitive issue: with a CO2 minimum price, gradually coal-fired power plants will become uneconomic to the point of disappearing from the German energy system altogether. A decision at EU level might ease a (likely Green party-triggered) debate on the exit of coal from the German energy mix. This in turn leaves another door open for the Conservatives as to future coalitions. It also legitimises coal exit in relation to heavy industries, labour unions and the coal industry-defending ‘Bundesländer’, the German states, in the German Bundestag.
Sector interconnectivity – profound changes in the transport and mobility sector ahead
There is consensus among the German parties: using renewable energies in other sectors than electricity generation will be essential for decarbonisation and to reach climate protection objectives. Particularly with regard to the transport and mobility sector, major changes are looming – not least as EU countries such as the UK and France have announced plans to ban diesel engines from 2030 or 2040. Germany’s Greens are with them on this, being the only party explicitly demanding a complete permit withdrawal for combustion engines from 2030.
As to e-mobility, all other parties (Greens included) agree on promoting it for climate and industrial policy reasons. How swiftly it will be widely implemented, though, depends largely on charging infrastructure and the integration capacity of distribution grids.
On infrastructure, all parties underline their intentions for development. The Conservatives have concrete goals, promising 50,000 new charging stations. Twin party CSU, of Bavaria, goes further, aiming to take the lead on ‘Mobility 4.0’ and providing 7,000 publicly accessible chargers by 2020.
However, a clean-cut ‘copper strategy’ to strengthen the transmission grid system will probably greatly increase costs, and will be limited by simple physics. Instead, intelligent solutions to provide flexibility should be considered more systematically.
Market entry for electricity storage
As renewable energies fluctuate in generation, their system integration needs intelligent control technologies and storage facilities. The German government has invested heavily in pilot projects and concrete recommendations are expected. Regarding storage, all parties agree on boosting R&D to speed up development. Favoured technologies vary: while the CDU focuses on battery cell production, LibDems and Social Democrats call for the development of various storage technologies, with the SPD explicitly mentioning market entry progams.
New players and potential conflicts in energy policies
Germany’s Federal Council, the ‘Bundesrat’, is likely to gain importance in shaping future energy policies, since today’s division lines are more defined by regional adherence than affiliation to a political party. This development might prove to become tricky for a potential Conservative-LibDem government. Also, it calls for more openness to a ‘give-and-take’ approach with regard to the German states.
Transmission grid extension? Yes
Locally, some grid extension projects continue to be disputed, while at federal level all parties agree to move on with projects already decided. The CDU underlines the work done during the past legislative period, while the SPD reiterates its demand for intelligent technologies. Also, in their current election manifesto, the Social Democrats softened their approach to the re-municipalisation of the distribution network.
Overall, a future German coalition government can be expected to come up with rather vague energy policy objectives. Ever-shifting power balances between federal and state levels, and rapid technological change, will bring more pragmatic, iterative policy making.
Today, the biggest common ground is found should the governing coalition of CDU and SPD be elected into office once again. It would probably implement a CO2 minimum price, develop sector coupling and intensify storage R&D.
The Renewable Energy Act, on the other hand, would likely stay, due to the Social Democrats, while alternative financing options would surely be scrutinised.
A government including the LibDems might question the status quo. The party puts forward concrete, partly markedly different positions, that might get watered down during government building.
The Green party’s programme falls short of expectations. Energy policy always having been one of the party’s core areas, this year’s programme focuses on the mobility sector instead, suggesting potential convergences with the reigning Conservatives. This shift in focus may be read as a signal, majorities provided, to negotiate either a CDU-Green coalition or even test the waters for a ‘Jamaica’ trialogue between Conservatives, LibDems and Greens.